Northern Bank of Kentucky v. Keizer
| Decision Date | 06 October 1865 |
| Citation | 63 Ky. 169 |
| Parties | Northern Bank of Kentucky vs. Keizer. |
| Court | Kentucky Court of Appeals |
APPEAL FROM FAYETTE CIRCUIT COURT.
J. W. and W. C. Houghton, who had been parteners in the manufacture of bagging and rope, and owned between them much more individual than partnership property, apprehending their inability to pay all their debts, on the 11th of January, 1862, assigned all their partnership and individual property to C. M. Keizer in trust, to apply the partnership property to the payment of their partnership debts, the individual property to the payment of their individual debts, and then to distribute among all the creditors, pro rata, the residue of the individual fund, if any should remain after full payment of the individual debts.
It appears that, under such a distribution, neither class of creditors would receive their whole debts, but that the per centage of the individual creditors would be much larger than that of the partnership creditors.
The trustee, apprehending difficulty, and wishing to avoid unnecessary responsibility, petitioned the circuit court of Fayette to direct the mode of distribution to which all the creditors should be adjudged as entitled.
The partnership creditors, in an answer and cross-petition, charged that the assignment "was made in contemplation of insolvency to prefer one class of creditors, and, therefore, they prayed for a pro rata distribution of the entire trust-fund among all the creditors, without distinction of class."
The individual creditors demurred to that cross-petition, and the circuit sustained the demurrer.
That the assignment was made "in contemplation of insolvency" is not denied, and, consequently, if the distribution which it directs is not such as each class of the creditors was entitled to by law, it does, inconsistently with the spirit of the statute of 1856, prefer one set of creditors over another, and, for that end, must be deemed unavailing, even though the apparent preference was not the voluntary choice of the assignors, but was dictated, as we may presume it was, by a belief that the law itself would make the same distribution, and, therefore, they could not, if they would, prevent it.
Then the only question is, does the law make the preferences prescribed by the assignment?
As to partnership property, equity gives to the partnership creditors priority over the individual creditors of the firm.
No doctrine of the modern common law is more conclusively settled, nor on more rational and consistent grounds.
The compensatory and reciprocal priority of the individual creditors, as to the individual property, though not, as the other, universally recognized, is, nevertheless, in our opinion, so well settled by both reason and preponderating adjudications as to entitle it our recognition.
Each partner having an implied lien on the partnership property as a security for the payment of all the...
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